“People should start to think about infrastructure as a separate asset class, like fixed interest and general equities,” head of infrastructure at GSAM in Australia, Geoff Frankish, told InvestorDaily.
“We think that there is plenty of evidence that infrastructure has enough different characteristics to be treated as an asset class in its own right,” he added.
Some of its unique characteristics include strong inflation protection and a high yielding asset.
“Infrastructure [assets have] a very good earning resilience because of the fact they often have very strong monopolistic market positions,” Mr Frankish said. “[Because of] the fact that they are often regulated or they have long-term contracts [and] they also have very good inflation protection.”
Retail investors have traditionally assumed infrastructure assets are highly illiquid, but that is not the case anymore with the growth of infrastructure specialist funds.
“We invest in listed securities. Our investments are quite liquid so we have no trouble moving our funds around between different securities,” Mr Frankish pointed out.
Infrastructure has often been associated with a high level of political risk but in Australia, because of the very well developed regulatory environment, this danger to investors is very low.
“The good news in Australia is that the regulatory environment has a number of attractive characteristics,” Mr Frankish said. “It is relatively well entrenched... so we have got a lot of precedents so that decisions don’t stray too far from previous decisions.
“We have got a very high level of independence of regulators from the political process,” he added.
GSAM believes this is a compelling case for investors to allocate a portion of their diversified portfolio to infrastructure.
“I think there is a very strong argument for inclusion, and we are talking here about asset allocation weights of [the] 5 to 10 per cent category,” Mr Frankish said.
